Recommendation 17

Organisations representing accountants and tax professionals wrote to us with concerns about the impact of HMRC’s volume compliance approach on companies.60 50 Qq 33, 34 51 C&AG’s Report, paras 2.2, 2.4 52 Committee of Public Accounts, HMRC performance in 2021–22, 33rd Report of Session 2022–23, HC 686, 11 January 2023, para 22 53 C&AG’s Report, para 2.6, Figure 11 54 Q 56; C&AG’s Report, Figure 11 55 Q 57; C&AG’s Report, para 11 56 Q 59 57 C&AG’s Report, para 2.18 58 Qq 60–62 59 Q 58 60 HMRCSR0007 Institute of Chartered Accountants in England and Wales; HMRCSR0015 Chartered Institute of Taxation 14 HMRC performance in 2022–23 They felt HMRC compliance staff treated companies with suspicion and lack the necessary expertise and training to determine whether projects qualify as research and development for tax purposes. They raised concerns that HMRC’s approach was discouraging some firms from investing in research and development. HMRC told us it had needed to act in response to the high levels of error and fraud and does not accept its actions have discouraged research and development investment. It said that it needs to listen to feedback from its customers, and that the new information requirements it has introduced should allow HMRC to better target its compliance checks.61 It accepted that it does not have large numbers of engineering experts in-house but that these are typically not needed for its volume compliance work. It explained that for higher-level disputes it can bring in expertise externally or from other parts of government.62 The tax gap